Custom, Excise & Service Tax Tribunal
M/S.Nabha Steels Ltd vs Cce, Ludhiana on 31 May, 2011
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
SINGLE MEMBER BENCH
Court No.1
Excise Appeal No.3114 of 2009-SM
(Arsing out of Order-in-Appeal No.302/CE/CHD/2009 dated 2.9.2009 passed by the CCE (A), Chandigarh)
For approval and signature:
Honble Mr.M.Veeraiyan, Member (Technical)
1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
M/s.Nabha Steels Ltd. Appellants
Vs.
CCE, Ludhiana Respondent
Present for the Appellant: Shri Naveen Jindal,Advocate
Present for the Respondent: Shri S.K.bhaskar, SDR
Coram: Honble Mr. M.Veeraiyan, Member (Technical)
Date of Hearing: 31.05.2011
Date of Decision: 31.05.2011
ORDER NO._______________
PER: M.VEERAIYAN
This is an appeal against the order of the Commissioner (Appeals) No.302/CE/CHD/2009 dated 2.9.2009.
2. Heard both sides.
3. The officers of DGCEI visited the factory premises of the appellants who are manufacturers of M.S.Ingots, and found excess quantity of 102.185 MT of sponge iron, (one of the raw materials) valued at Rs.12,73,313/-. The stock verification was done in the presence of Director of the appellant company and two independent witnesses. Shri Ajay Goel, director of the appellant company admitted excess quantity available and could not explain reason for the same. Subsequently, it was claimed to be due to mis-reporting by the production staff. In pursuance of the show cause notice dated 1.3.08, the original authority ordered confiscation of the excess found raw materials and allowed redemption on payment of Rs.2,04,371/-. He also imposed penalty of Rs.2,04,371/- on them.
4.1 Learned Advocate for the appellants submits that they are manufacturers of M.S.Ingots. The stock taking did not reveal any variation of stock in respect of final products. Sponge iron is one of the raw materials for manufacture of M.S.Ingots. The department has not produced any evidence to show that the excess found raw material is not duty paid. They have not identified the manufacturer or supplier of said sponge iron. Whatever goods available in the market are deemed to be duty paid. Therefore, presumption that the raw material is non duty paid, is not warranted. Further presumption that the said raw material has been used in the manufacture of unaccounted final products and which will be cleared without payment of duty is highly presumptuous. Rule 25 applies in respect of excisable goods manufactured by an assessee and not in respect of inputs procured by the assessee. In this regards, he relies on the following decisions:
(1) CCE, Surat-II vs. Narmada Fabrics P.Ltd.-2009 (233) ELT 397 (Tri.-Ahmd.) (2) CCE,Madurai vs.Sree Kaderi Ambal Steels Ltd.-2009 (233) ELT 398 (Tri.-Chennai) (3) M/s.Kiran Pondy Chems Ltd. vs. CCE, Trichy -2009-TIOL-CESTAT-MAD (4) CCE, Indore vs. Avanti LPG India Ltd.-2004 (166) ELT 186 (Tri.-Del.) (5) CCE, Delhi-I vs. Oceanic Cooling Towers (P) Ltd.-2003 (161) ELT 631 (Tri.-Del.) (6) CCE, Ahmedabad vs. Rajjay Fashions India-2008 (232) ELT 764 (Tri.-Ahmd.) (7) Hindustan Lever Ltd. vs. CC, Chennai-2008 (232) ELT 766 (Tri.-Chennai) 4.2 He also submits that the show cause notice has not invoked any other rules like Rule 26 and therefore confiscation and imposition of penalty should be set aside. In case it is held that the goods are liable for confiscation and penalty is imposable, a lenient view should be taken as there is no intention to evade any payment of duty.
5. Learned SDR strongly supports the order of the Commissioner (Appeals). The raw material which was found in excess is undisputedly excisable goods. The appellants have not produced any evidence for licit procurement. Under these circumstances, the conclusion that they are non duty paid is reasonable, and therefore, in terms of Rule 25 (1) (b) of Central Excise Rules,2002, the goods are liable for confiscation and penalty is also imposable. Even otherwise, the appellants having procured excisable goods without invoice are liable for penalty under Rule 26 of the Rules.
6.1 I have carefully considered the submissions and perused the records. Substantial quantity of sponge iron (one of the raw materials) weighing 102.185 MT was found in excess on the date of visit by the officers. The director has given no explanation for such huge excess quantity. Even in the reply to the show cause notice or before the original authority or before the Commissioner (Appeals), they have not claimed that they have procured licitly these goods on invoices. The submission that the department has not proved non duty paid nature cannot be accepted in the facts and circumstances of the case. It is not the case of the appellants that they revealed the source for purchase of the goods. They have pretended ignorance about source of sponge iron found in excess. They have also not subsequently claimed that the said goods were procured from a particular manufacturer or any particular dealer. They were only in a position reveal the source of procurement which they have failed.
6.2 If the sponge iron in such huge quantity was found in excess in transit, without any duty paying document or without any invoice indicating source, obviously the provisions of Rule 25 and Rule 26 will apply. Merely because the goods were found in the premises of user company, it cannot be said that the provisions of Rule 25 and Rule 26 cannot be applied, especially when they feigned ignorance about source of raw materials while admitting that they have no documents proving licit procurement. The decision of Honble Haryana High Court of Punjab and Haryana in the case of CCE vs. Annapurna Impex Pvt.Ltd reported in 2009 (244) ELT 35 is on the facts of the said case. In the said case, it was held that no credit was availed on raw material and goods were held to be non excisable items. Once, no duty is paid, there is no question of availing any cenvat credit on such raw material. The facts of other cases relied upon by the appellants are also clearly distinguishable from the facts of the present case.
6.3 Undisputedly, the appellants have acquired possession of the excisable goods, namely, sponge iron which was manufactured by some unknown manufacturers. If anybody was in a position to reveal the source of procurement, it was the appellant which they failed to do. The provisions of Rule 26 will apply in the facts and circumstances of present case as disclosed in the show cause notice, though Rule 26 was not specifically referred to. The liability to accounting for excisable goods by an assessee includes an auxiliary obligation to maintain accounts of raw material received and utilised. When such a huge quantity of raw material was found unaccounted and when no explanation was forthcoming, acquisition of unaccounted raw materials cannot be held for any honourable purpose. However no presumption can be made that this unaccounted raw material would be used for producing excisable goods which would have been cleared without payment of duty.
6.4 In view of the above, confiscation of the substantial quantity of unaccounted excisable goods deserves to be upheld. Some penalty is also warranted.
6.5. Considering the entire facts and circumstances of the case, redemption fine is reduced from Rs.2,04,371/- to Rs.50,000/- and the penalty is also reduced from Rs.2,04,371/- to Rs.50,000/-.
(Pronounced in the open court) (M.VEERAIYAN) MEMEBR (TECHNICAL) mk 1 5